Malaysia's foreign reserves hit a record US$139.7bil at end-2012 and the momentum is expected to continue in 2013, albeit slower, according to CIMB Investment Bank Bhd economist Lee Heng Guie.
“We set a conservation foreign reserves target of US$144.6bil as at end-Dec 2013,” Lee said in a report yesterday.
He noted that after taking into account foreign exchange revaluation losses due to the strengthening of ringgit against selected major and regional currencies, the reserves rose by US$6.1bil from US$133.6bil at end-2011 to US$139.7bil at end-2012.
“It was just US$300mil shy of the US$140bil mark. The current reserves level is sufficient to finance 9.5 months of retained imports and is 4.2 times the short-term external debt,” Lee said.
He added that the drivers underpinning the reserves accumulation were continued capital inflows fuelled by a prolong period of global monetary stimulus, improved domestic investment climate as well as solid economic fundamentals.
Lee said the sustained foreign interest in both equity and bond markets saw their shareholding rising to record highs in 2012.
He said foreigners were a net buyer of RM13.7bil of equities this year, almost 10 times RM1.8bil in 2011. This took foreign shareholding to 23.7% of total on Bursa Malaysia.
The same goes to foreign holdings of debt securities, which jumped RM61.9bil year-to-date to hit a new high of RM226.3bil at Nov 30, 2012, pushing foreign shareholding of government bonds to 30% in November.
The strong capital inflows also led the ringgit to appreciate by 3.6% to RM3.06 against the greenback at end-2012.
“We expect foreign reserves accumulation to continue in 2013, albeit slower, underpinned by continued current account surplus, albeit smaller, persistent capital inflows amid domestic general election risk and the progressive Economic Transformation Programme momentum.
“We set a conservation foreign reserves target of US$144.6bil as at end-Dec 2013,” Lee said.